This means that at the end of 2022, average asking prices are 5.6% higher than at this time a year ago, only slightly below the 6.3% growth recorded in 2021.
Tim Bannister, Rightmove’s Director of Property Science, comments: "Though we would always expect prices to drop in December, as motivated sellers try to capture the attention of a buyer before Christmas with a competitive price, this monthly dip is the largest we’ve seen for four years.
"It‘s an understandable short-term reaction to the economic turmoil and unexpectedly rapid mortgage rate rises and reduction in the availability of mortgage products that we saw in late September and October before things began to settle down. Despite this, we end the year with average asking price growth of 5.6%, which is only slightly lower than the 6.3% last year."
Economic headwinds including rapidly rising mortgage costs mean that some would-be buyers may have paused their plans for the foreseeable future. However, over the past two weeks, the number of people enquiring to estate agents is up 4% on the same period in 2019, and there are also signs that some discretionary buyers who are still able to move, are using the space between now and the New Year to weigh up their options.
Before sending an enquiry, future buyers need to consider what they could purchase, and the number of views of homes for sale on Rightmove is up 11% on last year. This indicates that there are many ready-to-go buyers, monitoring and waiting for a calmer market in 2023 after an uncertain last few months of the year.
Tim Bannister, says: "It’s understandable that some buyers are distracted, not only by the festive season but also by the thought that they may get a better fixed-rate mortgage deal and a more stable outlook by waiting until the new year. Our data suggest that there are many ready-to-go movers out there waiting for what they feel to be the right time to enter the market in 2023.
"We’d usually see a jump in home-mover activity in January, but it takes a while at the start of the year for any significant price changes to feed through, so we’ll be waiting for a potential bounce back in prices in February, which will be a very important leading indicator for the spring moving season."
Rightmove predicts an overall drop of 2% in average asking prices next year as economic headwinds continue to soften activity and lead to a more normal market, though price falls will be tempered by few forced sales. However, affordability constraints will bite in some segments and sectors of the market much more than others which makes a national average price prediction for new-to-the-market properties more difficult than usual this year.
This will lead to a more pronounced hyper-local market, where one side of a city, town or even street could fare better than another, depending on the types of property available and the desirability and affordability of the exact location. In this multi-speed market, working with a good, local estate agent who knows every corner of the area will be vital for both buyers and sellers.
After many months of having to act extremely quickly, there will be less urgency in the market as buyers wait for the right home to become available for their needs, and some sellers will hold out hope for a price that matches their expectations. We could therefore see a stand-off in the early months of 2023 between some sellers who are in no rush to drop their prices, and those affordability-strapped or hesitant buyers. This will lead to homes taking longer to sell, and we could see a return to the more normal time to find a buyer of around 60 days.
Tim Bannister, concludes: "After two and a half years of frenetic activity it’s easy to forget that having multiple bidders immediately lining up to buy your home was the exception rather than the norm in pre-pandemic years, and there will be a period of readjustment for home-movers as properties take longer to find the right buyer.
"We’re heading towards a more even balance between supply and demand next year, but we don’t expect a surge in forced sales which would cause a glut of properties for sale and contribute to more significant price falls in 2023. This is reflected in our prediction of a relatively modest average fall of 2% next year."
Tom Bill, head of UK residential research at Knight Frank, said: “House price declines since the mini-Budget are due to nervous rather than absent buyers. The number of new UK buyers registering in November was 5% up on the five-year average while the number of offers made was 17% down, Knight Frank data that excludes 2020 shows.
"Recent mortgage market volatility has dented activity but there will be more clarity around the longer-term trajectory for house prices from March next year as rates settle down. The spring selling season will see the price expectations of sellers put to the test and, after 13 years of ultra-low rates, could be a ‘wake up and smell the coffee’ moment.”
Marc von Grundherr, Director of Benham and Reeves, commented: “The wheels may seem to be coming off the UK property market with this, the biggest fall in home asking prices that we’ve seen in quite a while, especially in specific parts of the country such as the South West which is cooling faster than most as it had fared better than other places during the pandemic in increase terms.
"But we must remember that this index is one that reflects sellers’ asking prices and much of this angst is sentiment related and may well be restored as we begin to see the peak of inflation and interest rates. In other words, this is a reaction to the prospect of a property market decline rather than a decline in itself, albeit we are in danger of that becoming a self-fulfilling prophecy if we are not careful.”
James Forrester, Managing Director of Barrows and Forrester, commented: “The silver lining in the cloud here is that sellers are responding to signals that buyers are demanding lower prices and are prepared to sit things out whilst the market adjusts to recent economic woes.
"The fact that those that are selling have re-thought their asking prices in line with buyers’ lower expectations is at least a good thing for estate agents in that this means the gap between buyers’ and sellers’ pricing is now narrower and deals will still be struck accordingly.”
Chris Hodgkinson, Managing Director of House Buyer Bureau, commented: “Is this the death knell for the property market? Consecutive analyses from a number of house price indexes are now pointing in the same rather negative direction and the picture is bleak.
"On an annualised basis we could be looking at drops in the value of double figures by the spring and, whilst this will be blood-curdling for homeowners, particularly those that only bought recently, it should sound the starting gun for all those first-time buyers that have sat in the wings bemoaning high prices for years. Now is the time to jump in and grab a bargain.”
